Question

0 4800 8000 15. Given that you wish to use the payback rule with a cut-off period of two years, which projects in Table 1 would you accept? a. Project X b. Project Y. c. Project Z. d. None of the above. 16. Which of the following statements is true regarding the payback rule? The payback rule states that a project should be accepted if its payback period is more than a specified cutoff period. The payback rule emphasizes cash flows that arrive after the payback period. The payback rule considers the value of money, so it emphasizes that the more distant flows are less valuable. The payback rule will bias the firm against accepting long-term projects because cash flows that arrive after the payback period are ignored. a. b. c. d. Table 2s Cash flows for a project Year Cash Flow -8500 3 3500 4000 4000 17. The project in Table 2 has an Internal Rate of Return (IRR) of approximately: Hint: Begin with a discount rate of 16% in your calculations. а, 16% b. 16.38% C. 1790 d. 17.45%

Answer 1